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Chip shortage hits UK car production

Chip shortage hits UK car production

Market news |
By Nick Flaherty



Chip shortages described as ‘crippling’ saw UK car production decline by -9.8% in 2022 to 775,014 units.

The figures from the Society of Motor Manufacturers and Traders (SMMT) showed the annual total was 84,561 units down on 2021 and -40.5% off the 1,303,135 cars made in 2019 pre-pandemic, equivalent to a loss of more than half a million cars.

The main reasons for the depressed output were the crippling global shortage of semiconductors, which limited the ability to build cars in line with demand says SMMT, as well as significant structural changes, reflecting a loss of production at two volume manufacturing sites; and the impact of supply chain pauses in China due to Covid lockdowns.

Despite these challenges, UK factories turned out a record 234,066 battery electric (BEV), plug-in hybrid (PHEV) and hybrid (HEV) electric vehicles, with combined volumes up 4.5% year-on-year to represent almost a third (30.2%) of all car production. Total BEV production rose 4.8%, with hybrid volumes up 4.3%, and boosting output of these vehicles will be critical in the attainment of net zero, for both the UK and major overseas markets. 

A new analysis from SMMT shows the value of BEV, PHEV and HEV exports has risen seven-fold, from £1.3 billion in 2017 to more than £10 billion. As a result, electrified vehicles represent 44.7% of the value of all UK car exports, up from a 4.1%. BEVs in particular are seen as critical to the future prosperity of the UK, with their export value up more than 1,500%, from £81.7 million to £1.3 billion.

The UK’s strength in specialist, luxury and performance car makers was also further underlined, with output climbing 6.6% to 32,575 units, worth an estimated total of £3.7 billion at factory gate prices,

Total annual output for the UK market grew 9.4%, but this was not enough to offset a -14.0% drop in exports. Nearly eight in 10 cars (606,838 units) were built for overseas markets, compared with 168,176 for British buyers, emphasising the importance of free and fair global trade.

The EU remained by far the sector’s largest market, even as shipments declined -10.0%, with 57.6% of exports (349,424 units) heading into the bloc. Eexports to the US and China also fell, down -31.6% and -8.3% respectively.

Cars sent to Japan (+5.7%), South Korea (+32.8%), Australia (+4.7%), Switzerland (+2.7%) and South Africa (+23.0%) all increased, although together these represented just 8.4% of exports. Exports to Russia, a top 10 export market in 2021, meanwhile, fell -78.3%, with shipments made before the outbreak of war in Ukraine and the cessation of business.

“These figures reflect just how tough 2022 was for UK car manufacturing, though we still made more electric vehicles than ever before – high value, cutting edge models, in demand around the world. The potential for this sector to deliver economic growth by building more of these zero emission models is self-evident, however, we must make the right decisions now,” said Mike Hawes, SMMT Chief Executive.

“This means shaping a strategy to drive rapid upscaling of UK battery production and the shift to electric vehicles based on the UK automotive sector’s fundamental strengths – a highly skilled and flexible workforce, engineering excellence, technical innovation and productivity levels that are amongst the best in Europe.”

Looking forward, the latest independent outlook expects that, with easing semiconductor shortages, UK car and light van output should rise by 15% to 984,000 units in 2023 (842,200 cars and 141,800 light vans), an uplift worth some £3.9 billion. By 2025, production volumes are projected to surpass a million vehicles.

www.smmt.co.uk

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